By Steven Allen Adams | West Virginia Watchdog

CHARLESTON — A new report showing the cozy relationship between trial lawyers and state attorneys general shines a light on the actions of West Virginia Attorney General Darrell McGraw.

The Center for Legal Policy at he Manhattan Institute, a free market think tank based in New York, released a report today, titled “Trial Lawyers, Inc.: Attorneys General – A Report on the Alliance between State AGs and the Plaintiffs’ Bar 2011.”

James R. Copeland, director of the Center for Legal Policy, held a conference call with reports Monday to explain the report. Copeland was joined by Prof. Lester Brickman, a visiting scholar with the institute and a professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University, and Edwin Meese, a former U.S. Attorney General under President Ronald Reagan and the Ronald Reagan Chair in Public Policy at The Heritage Foundation, a conservative think tank.

The report looks at the relationship between the trial lawyer industry in state attorneys general. The report is number 16 in a series on trial lawyers since 2003. Copeland said the good news is tort costs, or the sum of all payments in tort litigation paid to individuals and attorneys, fell as a percentage of the economy for the sixth straight year. The bad news is trial lawyers are getting into bed with state attorneys general.

“What we want to focus on in this report is this new sort of cash cow; the nexus between the trial lawyers and the attorneys general of the various states,” Copeland said. “A lot of the progress that has been made has been made through legislative tort reform efforts and judicial exposure of crackdowns on abuse. With the state attorneys general, it’s been a growth industry.”

While the position of U.S. Attorney General is a presidential appointment, most state attorneys general are directly elected, requiring them to raise money. In many cases these donations come from personal-injury lawyers, who then benefit when attorneys general contract out business to these same lawyers and rake in millions from fees during court cases.

“It’s this triangle nexus,” Copeland said. “State AGs get campaign money from the private attorneys, the private attorneys approach the state AGs with litigation theories, and the state AGs contract out with the private attorneys on a contingency fee basis.”

“This creates a number of ethical quandaries,” he said. “There is nothing wrong in principle with contracting out government work to private parties. Certain attorneys general staff may not have the resources or the expertise to do every kind of litigation. But when you’re contracting out on a contingency fee basis you’re essentially giving a windfall to these private attorneys often for little work performed.”

According to the report, state Attorney General Darrell McGraw had the third highest percentage of campaign funds given by trial lawyers, with 44 percent of his donations coming from trial lawyers. McGraw was beat by Mississippi Attorney General Jim Hood with 45 percent and Iowa Attorney General Tom Miller with 44 percent.

McGraw, a Democrat first elected as Attorney General in 1992, received further scrutiny in the report’s chapter on pharmaceutical lawsuits, saying McGraw “leads the way.” The report criticizes McGraw for using no-bid contracts to hire trial lawyers as special assistant attorneys general despite both the West Virginia Supreme Court of Appeals and the State Auditor’s office saying McGraw’s office is not authorized to hire outside firms.

The report focuses in on McGraw’s lawsuit against Oxycontin maker Purdue Pharma, which accused the pharmaceutical company of using using aggressive tactics and downplaying Oxycontin’s addictive qualities. The four firms hired by McGraw’s office donated over $47,000 and reaped over $3 million in fees from the $10 million settlement.

Instead of depositing the award into the state’s General Revenue Fund, McGraw gave out the money, including to charities and a $50,000 donation to the University of Charleston’s pharmacy program. But when McGraw’s office wouldn’t turn over monies to the U.S. Dept. of Health and Human Resources, the federal agency withheld nearly $3 million in Medicaid funding from the state.

Two law firms used by the state Attorney General’s office were singled out for their donations to McGraw. Cook, Hall & Lampros gave $20,000 in campaign donations to McGraw since 2004. The firm is headed the nephew by marriage of former state Supreme Court Justice Warren McGraw, Darrel McGraw’s brother. The other law firm, DiTrapano, Barrett & DiPiero, donated $37,800 since 2004, or about 8 percent of the $500,000 McGraw has raised since during the same time period.

“You’ve got the state AGs getting a lot of campaign dollars from these law firms that are then getting contracts from the state AGs,” Copeland said Monday. “Darrell McGraw from West Virginia is fairly notorious for this.”

Fran Hughes, the Chief Deputy Attorney General under McGraw, dismissed the report’s findings. Hughes says the U.S. Chamber of Commerce has published similar reports attacking the work of the state Attorney General’s office.

“They can put whatever hat they want on it, whatever lipstick they want on it; a pig is still a pig,” Hughes said. “A study means nothing to me until I know who funded it, how it was conducted, and who reviewed and provided the statistical analysis. To me it’s just another attempt to stop attorneys general from enforcing consumer law.”

Hughes said that using outside trial law firms helps the state Attorney General’s office compete with large companies, who often hire armies of lawyers to protect their interests. Even when using outside firms, the state Attorney General’s office calls the shots, Hughes said.

“The decisions regarding settlements and all strategies are done in conjunction and under the direction of the Attorney General,” Hughes said. “What it does do is help us amass resources so we are able to litigate against a large company with large resources.”

The report encouraged states to post contracts between AGs and trial law firms within 15 days of execution, institute competitive bidding of contracts, greater legislative oversight, and standards for fees charged by law firms.